Commissioners file no: CTC 2844 2002

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1	I allow the appeal.

2	The claimant and appellant is appealing with my permission against the decision of the Chesterfield appeal tribunal on 9 April 2002 under reference U 42 045 2002 00578.

3	For the reasons below, the decision of the tribunal is erroneous in law. I set it aside.  I refer the appeal to a differently constituted tribunal for determination in accordance with the directions given in this decision (Social Security Act 1998, section 14(8)(b) and (9)). 

4	This case is about a claim for the disabled person’s tax credit (DPTC), formerly known as disability working allowance. The appeal to the tribunal concerned the amount of  DPTC to which the claimant was entitled for the 26 weeks from 9. 10. 2001. Decisions about DPTC are taken by the Inland Revenue. The Inland Revenue decided that the claimant was entitled to £38.45 a week.  This decision replaced a previous decision that she was entitled to £35.36 a week. 

5	The claimant appealed against  the Inland Revenue decision on several grounds. These related to the hours she actually worked, the position with regard to sick pay and holidays, her expenses, and whether her income included her tax credits. 

6	After the appeal had been made, the Inland Revenue made a supplementary submission to the tribunal. This recalculated the claimant’s entitlement on the basis of her earnings over the previous 52 weeks, rather than 5 weeks. On this basis her entitlement would increase to £40.52 a week, though no formal decision was taken at that time.

The tribunal decision
  
7	The tribunal held a paper hearing.  The tribunal decided that the assessment over the 52 week period was right. Although it did not expressly say so, it therefore confirmed the entitlement at £40.52 a week and in that sense allowed the claimant’s appeal. It expressly rejected the claimant’s claim for work expenses for her clothes, and dismissed her other grounds of appeal.

8	The claimant’s grounds of appeal from this decision were comprehensive. She reargued her case and challenged each aspect of the tribunal decision.  I directed a full submission from the Inland Revenue on those grounds. 

9	The Inland Revenue submission supported the application for permission to appeal.  With regard to the decision about the 52 week rule, the Inland Revenue correctly pointed out that the decision of the tribunal contained an error. While it is clear that the tribunal both considered and did not dissent from the revised assessment based on a 52 week period, neither the tribunal’s formal decision nor its statement make the necessary specific decision. It is also clear that the formal revising decision of the Inland Revenue was not before the tribunal. It is also clear that the Inland Revenue were no longer supporting the decision of 19. 10. 2001. The result is untidy, and does not make sufficiently clear what the tribunal was doing. I must conclude that the decision of the tribunal is not adequate on this point. However, it is clear that on its findings and reasoning the tribunal should have taken a decision confirming the assessment of £40.52 a week. As there appears to be no substantive dispute about this aspect of the appeal, I could deal with that without further discussion by a replacement decision for that of the tribunal. However, I must also consider another issue. 

The work expenses

10	The Inland Revenue also supported the application on the grounds that the tribunal had gone wrong on the question of work expenses.  This submission is also right. The tribunal stated that it rejected the claimant’s claimed deduction for work expenses for her clothes on the basis that they were not within regulation 21(2)(b) of the Disability Working Allowance (General) Regulations 1991. In so doing, it was relying on the submission made to it by the Inland Revenue.  Regulation 21(2)(b) excludes from earnings:
	
“any payment in respect of expenses wholly, exclusively and necessarily incurred in the duties of the employment “.

As the Inland Revenue pointed out in the submission to me, that relates to payments by employers to employees, not to expenditure by employees themselves.  I agree. That was emphasised by the Commissioner in R(FC) 1/90, mentioned in the papers but clearly not applied.

11	I agree also with the Inland Revenue that the rule that should have been applied in this case is that in regulation 22 of the Disability Working Allowance (General) Regulations 1991.  This requires the identification of the claimant’s “net earnings”.  Again, this was discussed in R(FC) 1/90, where the Commissioner applied the decision of the Court of Appeal in Parsons v Hogg [1985] 2 All ER 901 (also reported as the appendix to R(FIS) 4/85) to the similar regulation in the Family Credit (General) Regulations. The relevant judgment is that of Slade LJ, set out at paragraph 10 of R(FC) 1/90. That judgment was about regulation 2 of the Family Income Supplement (General) Regulations 1980, and the current regulations provide a much clearer guidance about the distinction between the approach taken for expenses of employees and those of the self-employed. The rule applying to the self-employed is, in this case, in regulation 25 of the Disability Working Allowance (General) Regulations 1991. That applies the “net profit derived” (regulation 25(1)(a) after deduction of “any expenses wholly and exclusively defrayed” (regulation 25(3)(a). The test set out for employees by Slade LJ, and adopted by the Commissioner in R(FC) 1/90, imposes a test of necessity in the case of employees. The expense must be necessary for the employee to undertake the employment, as well as wholly and exclusively for that purpose. There is an obvious analogy to the rules that then applied for income tax. 

12	I raised with the Inland Revenue the question whether, in determining deductions from earnings for the purposes of DPTC, account should be taken of the disabilities of the particular claimant. The point I had in mind was that it might be that a particular claimant had to incur extra expenses (for example, special clothes or shoes) to enable that claimant to work when other workers without that disability would not need to incur that expenditure. In other words, what might be necessary for a disabled worker should be judged for the purposes of this benefit taking into account the disablement. The submission of the Inland Revenue was that this was not relevant on the facts of this case as the claimant was receiving only the lowest rate of the care component of disability living allowance (because of the cooking test)  and that was not relevant to clothing claims. I accept that, and do not explore this point further. 

13        The Inland Revenue then submitted that in this case it could not be said that the expenses for which the claimant argued were wholly, exclusively and necessarily incurred for the purposes of her work. And it drew my attention to further evidence on this point. The claimant objected strongly to that conclusion, submitting yet further evidence on the point. On that basis I consider that the matter should go to a new tribunal to determine how the correct test is to be applied in the light of all the evidence.

Directions to the new tribunal 

14	I direct the new tribunal as follows. With regard to the decision under appeal, and subject to the issue of expenses, it should confirm the award of  DPTC of £40.52 a week for 26 weeks from 9. 10. 2001, as set out at document 52 in the papers unless there are new submissions on the basis of which it finds some reason not to do so. It should also consider whether any of the expenses that the claimant claimed were expenses incurred by her of a kind such that they were in fact wholly and exclusively incurred by her for the purposes of the employment, and that in the particular circumstances of her employment and her claim they were necessarily so incurred. It should take into account all the evidence now in the papers and any further evidence in deciding that point. If it finds that expenses should be deducted in calculating net earnings, then the award of  £40.52 (or other sum) should be adjusted accordingly. I direct the tribunal that none of the other issues raised by the claimant are now relevant to the determination of this appeal. The tribunal will note that on this basis the claimant’s appeal has already resulted in an increase in the claimant’s weekly award from  the original assessment at £35.36 a week.  

								David Williams
								Commissioner

								09 October 2002
[Signed on the original on the date shown]